Trouble connecting bones and finding the right orientation for a spine
See this tutorial on rigging: https://cgi.tutsplus.com/tutorials/building-a-basic-low-poly-character-rig-in-blender--cg-16955

There you can learn some of the fundamentals of a biped character rig. Unlike a human body, all the bones of a rigged character may not connect directly. There you will see how to use Make Parent > Keep Offset to connect your bones in a proper armature.

EDIT: I've constructed a basic rig for your little guy based off the article I linked to. I recommend that you rig him yourself for education's sake, however I am providing the Blend file for your reference.

The Blend exchange site isn't working for me right now, so here's a PasteAll link: http://pasteall.org/blend/index.php?id=46291